Factbox: Energy Issues Facing the White House

(Reuters) – President Barack Obama on Wednesday will set a goal to reduce the amount of oil the United States imports by one third in a little more than a decade, according to White House officials.

The announcement comes as rising oil prices and the Japanese nuclear disaster bring U.S. energy policy to the forefront for the American public.

Here are some of the top energy issues the Obama administration faces:

Gasoline Prices

Consumers are paying about 29 percent more for gasoline than they were a year ago, with the average price now $3.60 per gallon due to political unrest in the Middle East.

If gasoline prices keep rising, Obama could decide to draw crude from U.S. emergency reserves, a move that could have an immediate impact on gasoline prices.

The U.S. futures regulator is also under pressure to rein in speculation in energy markets, although it’s an open question whether proposed limits on trades by funds and other large players would affect prices.

Biofuels

White House officials said corn ethanol has significantly reduced U.S. oil dependence, but advanced biofuels will need to play a bigger role. Obama will set a goal of breaking ground on at least four commercial-scale cellulosic or advanced biofuel plants in the next two years.

Government incentives and mandates have so far failed to kick-start development of fuels made from non-food plant materials like switchgrass and wood chips.

Last year, the government slashed the amount of cellulosic ethanol mandated by law because targets were far beyond reach for the industry, which cannot yet produce the fuel at competitive prices.

Oil and Gas Drilling

With gasoline prices on the rise, the Obama administration faces intense pressure from Republicans to expand domestic oil and gas production.

While the White House says it remains committed to safely developing U.S. oil and gas after the BP oil spill, Republicans have complained the administration has moved too slowly to resume offshore drilling.

With summer driving season approaching and oil prices above $100 a gallon, the pressure to produce more domestic fuel will likely only increase.

Clean Energy Standard

Development of renewable energy sources, such as wind and solar power, has always been a top priority for the Obama administration.

With the White House’s original plan of a comprehensive energy and climate change bill no longer viable, the administration has set a goal for the United States to get 80 percent of its power from so-called “clean” energy sources by 2035.

The mandate, which needs approval from Congress, would include renewable sources like wind and solar, as well as traditional forms of energy with low carbon emissions, such as nuclear power.

Keystone Oil Sands Pipeline

On the one hand a pipeline to bring crude from Canada’s oil sands could go a long way in making America’s energy future more secure. Canada is one of the top U.S. allies and the proposed $7 billion Keystone XL line that would bring oil from Alberta to Texas refineries could help cut reliance on the Middle East.

But crude from the oil sands takes more energy to produce, resulting in more emissions than average petroleum used in the United States. U.S. farmers have also complained the pipeline’s expected route goes over a fragile aquifer.

This month the State Department ordered an additional environmental review and said that it expected to make a final decision on a permit by the end of the year. TransCanada Corp, which hopes to build and operate the line, hopes the line will be in service in 2013.

Natural Gas

The United States is undergoing a natural gas boom thanks to expanded fracking, or hydraulic fracturing. This has helped lower gas prices and could prompt conversion of gasoline-fueled vehicles to run on natural gas. It could also push utilities to close old coal plants and open natural gas ones.

Obama is trying to push cities and companies to convert bus and vehicle fleets to run on natural gas. This could benefit shale gas producers such as Range Resources Corp Chesapeake Energy Corp and Anadarko Petroleum Corp.

But the gas revolution could be dampened by complaints from communities that fracking pollutes water supplies. Chemicals used in fracking and radiation and heavy metals brought up by the process have all been blamed for polluting water.

The Environmental Protection Administration is working a study on the effects of fracking, which involves injecting chemicals, water and sand deep underground to break rock and unleash gas.

Nuclear

Obama has made nuclear power a key part of his pitch to get bipartisan support for investment in “clean energy,” asking for $36 billion in federal loan guarantees to help finance new reactors like the ones planned by Southern Co in Georgia.

The administration has confirmed it still supports expansion of nuclear power, but the push may be less politically attractive in the wake of the Japanese nuclear disaster, and the subsequent slip in U.S. public support for the option.

Energy Secretary Steven Chu has urged more research and investment in a new type of reactor — the small modular reactor — which he says is a safe long-term alternative.

Article by Ayesha Rascoe, Roberta Rampton and Timothy Gardner; edited by Sofina Mirza-Reid; appearing courtesy Reuters.